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Diesel Drops Steeply; Oil Hits Lowest Price This Year

National on-highway diesel prices dropped 4 cents from last week, landing at $3.897, while crude prices fell Monday to their lowest this year.

It was the second consecutive weekly drop for diesel prices, according to the Department of Energy's weekly fuel price report. Prices fell in every region.

California took the biggest hit at 6.9 cents, but remained the most expensive at $4.067 per gallon. The Rocky Mountain region dropped a meager 0.4 cents, but was also the cheapest at $3.851.

Crude oil fell on Monday to the lowest price yet this year. Benchmark West Texas Intermediate dropped 6.4%, $5.57, to $81.31 per barrel. In the past two weeks, oil has slid nearly $16.

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The precipitous drop followed Standard & Poor's announcement Friday that it had downgraded U.S. Government credit from AAA to AA+ for the first time in history. This itself followed terrible economic numbers in the second quarter and serous concerns over European sovereign debt.

Although there are fears that global oil demand will be damaged, evinced by sell offs as traders put their money into more stable treasury bonds (ironically) and gold, a long-time drop off is far from certain.

Some analysts believe that increased demand in the developing world, particularly China, will shore up demand. Goldman Sachs predicts prices to rise next year.

Finally, it is important to note that oil is still well above the 12-month low of $71.63 set almost a year ago in August.